# Apax Global Alpha unique ‘Hidden Gems’ strategy

- Link: https://www.directorstalkinterviews.com/apax-global-alpha-unique-hidden-gems-strategy/4121134754
- Published: 2023-12-01T07:58:23+00:00
- Author: Amilia Stone

In our view, the most interesting new information from** Apax Global Alpha **Ltd(
LON:APAX) 3Q results is the comment “a further five investments post quarter end”
with a further one announced since. This six-week performance compares with two 
investments in the whole previous quarter. Market wide, there are comments about
encouraging green shoots of activity, but Apax is now completing deals. We explore,
here, what is unique about the “Hidden Gems” strategy and why it is creating these
opportunities. Interestingly, the deals have a broad range of EBITDA growth options,
giving comfort that unchanged target returns remain realistic despite the higher
interest rate environment.

 * **Successful strategy:** In our view, the company’s recent new investment acceleration
   has been driven partially by market conditions but also its unique position. 
   Focus is on improving the operational performance of investments, the mid-market,
   secular-growth, resilient sectors, and its scale, experience, brand and global
   offices.
 * **New opportunities:** Apax Global Alpha’s new investments come from carveout
   and public-to-private deals as well as purchases from other PE firms. Their operational
   improvement opportunities include using existing playbooks to enhance products,
   pricing, distribution, and geographical footprint as well as inorganic growth.
 * **Valuation:** Listed holdings and Derived Investments mean that ca.25% of their
   portfolio is marked to market. Adjusting for the debt portfolio at par, AGA’s
   discount to NAV (30%) rises to 40%, well above the peers’ range (17%-34%) on 
   its PE portfolio alone. The NAV appears resilient, making the discount absolutely
   and relatively anomalous.
 * **Risks:** Sentiment to costs, the cycle, valuation and over-commitment are sector
   issues. Residual risk on the 2020-21 IPO positions appears to be modest. The 
   Debt portfolio generates additional returns, income towards dividends, and has
   liquidity/capital benefits, but complicates the story.
 * **Investment summary:** Apax Global Alpha has delivered market-beating returns
   by selecting businesses that it can transform post-acquisition. Buying these 
   companies at a discount to peers (ca.20%), accelerating their revenue growth 
   and improving their margins, before selling the reinvigorated business at a premium
   to those same peers (ca.10%) is the playbook that has been used repeatedly. Investments
   focus in sectors with structural growth and resilience. Capital flexibility is
   enhanced by the Debt portfolio. The discount is the “icing on the cake”.

[231123-Hardman-Apax-Global-Alpha-APAX-Hidden-Gems-strategy-green-shoots-into-live-deals](https://www.directorstalkinterviews.com/wp-content/uploads/2023/12/231123-Hardman-Apax-Global-Alpha-APAX-Hidden-Gems-strategy-green-shoots-into-live-deals.pdf)
[Download](https://www.directorstalkinterviews.com/wp-content/uploads/2023/12/231123-Hardman-Apax-Global-Alpha-APAX-Hidden-Gems-strategy-green-shoots-into-live-deals.pdf)

Share on: